US Hotels: breathe easy in the holiday paradise

Dhe USA is in opening mode: More and more states are relaxing the mask requirement. Because the number of corona cases in the States is very low, recently there were only around 5,000 new infections per day – although only two thirds of the population in the USA, that is 218 million people, are fully vaccinated. Since the omicron wave has died down, business people have been meeting in person again more often. Many conferences are again taking place in major cities such as Los Angeles, Chicago and New York, much to the delight of the entertainment industry. Shows are shown almost as usual on New York’s Broadway, but masks and vaccination cards are still required.

The hotel and catering industry breathes a sigh of relief, bars and restaurants open in waves. Hotel occupancy has been increasing for months. The prices of the industry giants Marriott, Hilton and Hyatt are in a record mood – despite the Russian invasion of Ukraine. At the peak of the pandemic as of March 2020, the trio’s shares had collapsed to multi-year lows. The giants saved and furloughed employees, reduced salaries, reduced working hours, postponed investments. Investors also had to suffer, the hotels froze dividends and stopped buybacks.

If you follow the most important managers in the industry, then the perspectives of the guild are promising. “Our fourth quarter of 2021 shows strong progress, even compared to 2019. Although new variants of the virus have had some near-term impact, we are optimistic that the recovery across all segments will accelerate in 2022,” said Hilton CEO Christopher Nassetta International. In 2020, the hotel giant had closed 1,280 houses, in 2021 Hilton closed 360 hotels, mainly in the USA and Europe. Now it’s open again. According to Nassetta, the hotel chain wants to grow strongly, increase the number of rooms, free cash flow and increase margins. Key industry indicators are also improving, with Hilton doubling revenue based on available room capacity in the fourth quarter.

sales doubled

After the long pandemic, the guests apparently want to treat themselves and are willing to spend more. Marriott International, the world market leader with almost 1.4 million guest rooms, also wants to take advantage of the positive trend. In the fourth quarter, the group doubled sales to $4.4 billion. As a result, the result turned around a good 600 million dollars from minus to plus, 468 million dollars in profit were posted in the Christmas quarter. “We’ve seen significant strides in the global recovery in 2021 – despite the emergence of new variants. The wanderlust is incredibly resilient,” said Marriott Leader Anthony Capuano.

Through the fourth quarter, global revenue per room at Marriott was 19 percent below pre-crisis levels. That was already significantly better than at the peak of the pandemic. The hotel group’s average daily rate almost recovered to its previous level in the Christmas quarter.

“Each of our regions saw a significant sustained recovery in the fourth quarter compared to the third quarter,” said Capuano. However, business in China is suffering from the regime’s non-Covid strategy. Omikron is causing a setback here, especially for business and group travel. Nevertheless: “We are optimistic that the global recovery will progress significantly in the course of 2022.”

New expansion phase

The results of the big ones are already impressive. In 2021, Marriott earned $1.1 billion, while Hilton earned $407 million after taxes. And Hyatt significantly reduced its loss. Analysts are also expecting a turnaround in earnings for this chain in the current year.

The large hotel groups are using the upswing for a new phase of expansion. As early as 2021, Hilton opened 414 new houses, and the empire now has around one million rooms. Most notably, it expanded its luxury all-inclusive resorts. In Latin America and the Caribbean, there were also the Hilton Cancun and the Yucatan Playa del Carmen.

In August, Hyatt bought Apple Leisure Group, a resort management company with 100 hotels in 10 countries, for $2.7 billion. These include fine all-inclusive resorts in Acapulco, Curaao, the Canary Islands, Menorca and the Caribbean island of St. Martin. It was Hyatt’s largest acquisition in company history.

Marriott added more than 86,000 gross rooms to inventory last year, a record. In the current year, the number of rooms is again expected to increase by between 3.5 and four percent. Capuano also wants to return money to the shareholders. After the outbreak of the pandemic, Marriott stopped paying dividends. The last quarterly payment was made in February 2020.

As one of the few major chains, Choice Hotels International remained profitable during the pandemic. The franchise operation owns few properties, but twelve brands such as Comfort Inn, which are mainly known to US customers. Choice leases the name, logo and concept to its tenants. The overnight stays are cheap and the chain is popular with consumers. Choice is steered by 75-year-old Stewart Bainum, who took over the family business in 1987. His father built it up, ran a plumbing business on the side and drove a taxi. The son started with 290 hotels, today the empire has 7,100 hotels in over 40 countries. Bainum keeps costs low and 6.4 percent of the shares, the family owns another 13 percent – a good basis for further solid construction work.

INVESTOR INFO

The world market leader, which also owns the chains St. Regis and Ritz-Carlton, is emerging from the crisis stronger than ever. A number of smaller competitors went bankrupt, less competition means more market power for the industry leader. Analysts are assuming that sales will increase by around 38 and 14 percent this year and next, respectively. Earnings should pick up speed even faster: According to estimates, earnings per share should rise from $3.19 (2021) to $6.88 by 2023.

In the crisis year 2021, the giant opened more than one hotel every day on average. Hilton owns 6800 properties worldwide. Hedge fund guru Bill Ackman used the plunge in prices during the pandemic in early 2020 to add a third to his position, and his investment firm Pershing Square Capital now owns 4.5 percent. The earnings multiple of the share seems ambitious, but analysts expect the industry to recover in the long term.

Originally a family business, the franchise model with around 7,100 hotels in 40 countries is now a money-making machine. Last year, the surplus rose from $75 million to $289 million, a record result. Of that, $38.4 million was returned to shareholders through dividends and share buybacks. In January 2022 alone, $17.6 million was added through dividends and stock purchases. Attractive admixture.

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